SINGAPORE (Jan 17): DBS Vickers is maintaining its "hold" on Singapore Press Holdings with a target price of $2.78 given 1Q18 earnings came in line with the house's expectations.

Core operating profit for 1Q18 was 2.1% y-o-y lower at $76.7 million. Revenue declined 7% to $259 million while cost of sales declined by 5.3% and operating expenses fell by a stronger 22.6%.

Sales from display, classifieds and newspaper ads fell 17.9%, 12.5% and 16.3% y-o-y, the slowest rate in the last five quarters.

"We expect FY18 DPS to be maintained at 15 cents. The declining adspend outlook should be mitigated by staff rationalisation, which would help to support operating earnings and DPS," says analyst Alfie Yeo, "We leave our earnings estimates and target price largely unchanged."

This led to a 1.4 ppt improvement in EBIT margins to 29.6%. Headline earnings were 32.1% y-o-y higher at $60.4 million, largely due to better investment income performance of $12.4 million versus $1.8 million loss in 1Q17.

Revenue from the media segment fell 14% y-o-y, as a result of 16.7% lower advertising revenue of $121 million. Revenue from property remained stable at $61.2 million while revenue from other businesses grew 48.2% y-o-y to $23.6 million from a low base of $15.9 million.

Most cost items were lower, led by lower newsprint costs, bonus provision, depreciation and retrenchment costs. Net operating expenses declined by 8.8% y-o-y to $182.4 million leading to EBIT margin improvement.

Shares in SPH are down 2 cents at $2.69 or about 20 times FY18 earnings.